by Brad Michelson
The music industry is faltering. Bands don’t know if a life of rock-and-roll is a viable economic future to pursue and newly established, grassroots record companies are finding it hard to pick up the slack. The only people seeing marginal success are our favourite industry antagonists: the major record labels.
Still, marginal is the key word. Music sales are down. Concert ticket and merchandise sales are down. Even downloads are down. If it’s not free, no one wants it. There doesn’t seem to be a clear way out of this tempest of an industry recession. The labels are finding excuses to point fingers, but it’s evident that consumption trends have changed and the systems that have been established over the last decade are just not working for them.
The music industry has always fought technology, fearing its effects.
“Traditionally, the record industry has never embraced a new high-tech format,” said SteveKnopper, contributing editor for Rolling Stone and author of Appetite for Self-Destruction: The Spectacular Crash of the Record Industry in the Digital Age. “They resisted radio. They resisted recorded music, period. They wanted to stick to sheet music.”
When piracy and file sharing took off a decade ago, record companies began freaking out about how this new kind of music sharing would affect their sales. After a period of resistance, there was talk of the industry collectively developing a new format for digital music.
One of these formats was known as MusicDNA. This new digital file had the same audio quality as a regular mp3, but also the ability for added metadata, such as lyrics, artwork, blog posts and videos to enhance the user’s experience. The kicker: the technology prevented the file from being copied or shared.
But the format never seemed to catch on through any major music service or company. This could partially be due to the fact that MusicDNA was supposed to rival Apple’s iTunes LP, a format that offers similar added content.
“[They knew] that to expand their business, they had to introduce a new format,” said Knop- per. “What they didn’t count on was a format being forced upon them against their will by the public, and of course, that was the mp3.”
Resistance has been one of the fatal flaws of the industry. In the past, the music industry has developed new platforms for listening, buying and enjoying music. The last 50 years have seen four different major formats: vinyl, cassettes, CDs and mp3s. Each of those, be- cause of the mass cultural popularity of music, had a 10- to 15-year shelf life before a new medium took over.
This trend has been broken by the mp3. It is the industry’s fault for tolerating the expired shelf life of the format. The longer something is around, the more likely people will find a way to exploit it.
Piracy is something that the music industry needs to come to terms with. Piracy can’t be contained, stopped, dismantled or fought — at least not right now. The argument being made by the record companies is that governments with lax copyright laws are enabling ‘criminals’ to ‘steal’ music. The problem for them is that once one website or service gets taken down, two more pop up in its place. What makes it even worse for lawmakers is that these sites are structured in a way that almost always slip through cracks in the host country’s legal system.
One of the most popular cases of this is Sweden’s seemingly eternal battle with the popular torrent site The Pirate Bay. The site was rated the 17th most popular website in 2008. This file-sharing flagship has been under constant attack from its home country because of its popularity. But they haven’t just sat back and taken their legal beatings; The Pirate Bay has been using legal loopholes in Swedish law to get out of trouble for years. These extend to the point where they were protected by diplomatic immunity by using the Pirate Party’s headquarters to host its servers inside the walls of the Swedish Parliament building. Even with this seemingly institutionalized medium for finding and distributing music throughout the world, there are still people who argue against it and suggest more of a cooperative approach.
“Let me start by saying that I’m not pro-copyright infringement,” said Knopper. “I actually think it was appropriate when the music industry sued the entities that were guilty of piracy. What I could criticize the industry for is not seeing the digital download market as an opportunity. Instead, they just rode the CD model all the way into the ground.”
But what has previously been seen as a two-sided battle has recently seen signs of peace — at least in the film industry. Paramount Pictures, one of the biggest studios in Hollywood, has teamed up with bit torrent sites, like The Pirate Bay, to distribute their new film, The Tunnel. The movie is being financed through crowd sourcing, allowing people to buy a frame of the movie. With about 135,000 frames, that’s a lot of funding. While the crowd-sourcing isn’t big news, the partnership with file-sharing sites is. If they can do it, and potentially make it work, why can’t the music industry?
Lack of Initiative
When was the last time that the music industry did anything that changed the way you experi- ence music? No, the sexification of music post-Christina Aguilera’s “Dirrty” video doesn’t count. The vinyl resurgence of the past few years was exactly that — a resurgence. And long form music videos have been around since the ’80s.
In reality, there has been little new creative initiative. This is because of a lack of creative in- novation in the higher layers of the industry.
“Doug Morrison, recently of Universal, has said pretty publicly that there aren’t that many technologists at the top layers of the music business. There were a bunch towards the bottom,” said Knopper. “These guys were not guys who were going to go into the labs and say, ‘Let’s concoct a new technology.’ They weren’t Steve Jobs characters.”
Knopper, like many industry critics, believes that there was a period about 10 years ago when the music industry had a chance to innovate, but failed to do so.
“At the time that Napster came around, 1999-2000, the record industry was at its absolute peak. ’N Sync, Justin Timberlake, Eminem and Britney Spears, all those guys were selling seven, eight, nine, 10 million records in their first week. Those were just crazy numbers that we will almost certainly never ever see again. In addition to that, [the industry] had this amazing business model [where they] put out, one, two, three good songs by an act, and sell it on a $15 to $18 CD. They were making money hand over fist. Nobody in the industry wanted it to stop.”
The industry took a look at the new emerging model for music, working with a ‘free,’ or nearly free model, earning money off touring and merchandise with very little from music sales, and chose to resist it.
“The music industry looked at that and said, ‘No way do we want to go down that road. We’re making money hand over fist. We’re huge. We have bulletproof limos. We’re super rich guys. There’s no reason we should [do that].’”
But the plan to make money off downloads has had complications. In order to change things, the companies would have needed to re-negotiate the artists’ contracts.
“You can’t just say, ‘Hey, we’re going to start selling Beatles music online.’ As we’ve seen, you can’t do that. You need to get the permission from all the Beatles, their publisher, their record label, etc.,” said Knopper. “That whole thing was a very complicated process. Nobody in the music industry was really excited about moving in that direction because of all those complicated things.”
Channels of Distribution
One question surrounding the music industry is the labels’ use of distribution channels. Over the last few years, hundreds of online avenues for distributing and discovering music (both legal and not) have emerged online and in print media. By now, the four major record labels (EMI, Universal, Warner, and Sony) have missed the wave.
“One key thing that they should have done was to make a deal with Napster. At its peak in 2000, there was something like 20 million users on Napster.”
In his book, Knopper goes through all the hypothetical numbers, outlining how much money the industry actually would have made if they had teamed up with companies like Napster and began offering people paid subscription services.
“You would have probably lost certain people who like the radical, anti-establishment part of Napster, and you would have lost, just simply, people who like to get music for free,” said Knopper. “But again, think about Facebook as if it was built around music and you could actually download songs and share playlists. Instead of sharing music through videos on YouTube, which is kind of how you do it now on Facebook, each time you make a transaction like that, it makes money for the music industry.”
It’s a revolutionary idea, but Knopper acknowledges that it’s easy to point fingers and criticize with 20/20 hindsight. For the labels, it’s all about the money. Without it, there are no means for them to continue their operations, a sympathetic angle even to the staunchest pro-piracy advocates.
“I actually think that the music industry would love a $10-a-month-subscription service at this point. But the question is, will consumers go along with it now that they are used to the Apple model and getting all their music for free?”
We may be able to see how this works out in the near future. Apple is rumoured to be launch- ing its paid, cloud-based music service this summer. Whether it will catch on or radically change the industry is anybody’s guess.
For now, the industry is in a wait-and-see mode. No one is willing to gamble on attempting to institutionalize a new business model for fear that the public won’t latch on.
Who Needs A Label?
The usefulness of record labels is a widely-argued industry topic today. Some say that to get a song on the radio or a video on MTV, you need the media contacts of a label. However, some bands say that they can make more of a living without representation.
“I think it depends on what kind of band you want to be,” said Knopper. “The most efficient way to [become] a Justin Timberlake or a Lady Gaga is . . . to sign with a label. [For] everybody else who doesn’t want to do that . . . there are many more resources for marketing online and touring and all these different things to make money than there used to be.”
In fact, many superstar bands that used to associate with record labels have parted ways with their old business partners and decided to go forth on their own accord. This extends from Radiohead (with their pay-what-you-want-model, making up the money on concert sales), to Trent Reznor with Nine Inch Nails (after his public split with Interscope Records, he encouraged fans to steal music and share it with their friends), as well as bands like Weezer and OK Go.
But How Does This Apply To Newer Bands?
“What they basically have to do is focus on making good music, putting their name out there, and touring a lot,” explained Knopper. “Once they come to the crossroads of [whether to] sign with a label or not, that’s where they have to decide what kind of artist they want to be. If you want to be Lady Gaga, you probably have to. If you want to be Mumford and Sons, you probably don’t.”
But Mumford and Sons, and similar bands, are part of a small percentage of acts that are popular despite being signed to smaller independent labels. Knopper cites Arcade Fire as another example. These groups, much like superstar bands, already have a die-hard indie following who will like them regardless of whether they play at the Grammys or not. This doesn’t apply to newer independent bands, however.
Most bands work for years for the chance to sign with a major label. One of these bands was a group from Vancouver called The Februarys. The Febs were one of the lower mainland’s most promising rock acts, constantly selling out shows wherever they played in B.C. After releasing two albums, the band was offered a contract with Canadian label, Wind-Up Records, a subsidiary of Warner Music, in 2008. The group quickly moved to Toronto. They began writing and recording their next record in Nashville, Tenn., and released a music video for the single off the upcoming record.
After a year of production setbacks, delays and a lack of gigs, the Febs were part of a seldom-discussed dropping of bands from Wind-Up’s repertoire. Since then, the band seems to have ceased to exist. Although this mass forced exodus of record label-backing is rumoured to be due to a drop in funding or low record sales for the label, stories like these are a deterrent for up-and-coming bands.
The Search For The Next Big Thing
The near future of the music industry is up for debate. Critics are past pointing fingers at the major labels for not updating the format and driving the CD model into the ground for selfish reasons. Now the community is looking forward, discussing new ways for the industry to revitalize itself and hopefully recover from this multi-layered recession.
The new ideas being discussed, tried and criticized are yet to be seen as effective. Bands are now second-guessing the usefulness of labels and have begun going at the business on their own accord, working on business models that work better for them and end with a better economic outcome. Until then, the industry will continue looking forward to the next best thing.
“The golden goose was killed a long time ago,” said Knopper. “Now we’re dealing with, as they say, pennies instead of dollars.”